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Why is this so taxing?

Posted on 23rd March 2016 at 4:23 pm

The Land and Buildings Transaction Tax (LBTT) (Amendment) (Scotland) Bill was introduced to Parliament in January 2016. Following similar proposals introduced by Westminster, the Bill introduces an LBTT supplement on second homes. The intention is to help first-time buyers as well as preventing any distortions in the market. The changes will take effect from 1 April 2016 and will apply to transactions settling on or after that date.

A “second home” is any property purchased by either an individual or a couple which is not a replacement of their main dwelling. The additional tax will be payable where the purchase price exceeds £40,000, at the rate of 3% of the total price. The buyer is deemed to have replaced their main dwelling where they have sold in the last 18 months prior to the effective date; where they have not already sold but do so in the period up to 18 months after the effective date, then the tax can be reclaimed. This applies to all properties owned by the buyer, including those outwith Scotland.

In the case of married couples, the additional tax applies regardless of whether title to any of the properties is taken in joint names. Parents who take title to property in the name of their children are also affected: a dwelling which is owned by a person under the age of 16 who is a child of the buyer, or the buyer’s spouse, civil partner or cohabitant, is treated as being owned by the buyer.

Where the buyer is a company or other non-individual, even if they own only one property, the supplement is payable. The rationale behind this is to avoid situations where an individual may choose to take title in the name of a company for the sole purpose of tax avoidance.

Author

Lisa qualified as a solicitor in 2012 and joined MacRoberts in early 2015. She is based in the Real Estate Property team in the Dundee office.

Lisa deals with all aspects of both commercial and residential conveyancing, including the acquisition and disposal of land for development, industrial properties, refinancing and negotiation of commercial leases, and has experience in advising a broad range of clients including developers, financers, investors, and pension schemes.

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